Calgro M3 is starting to reap the benefits of its restructuring plan
CALGRO’S M3 restructuring has started to bear fruit, with debt further reduced in the year to end-February, it is back into profit and liquidity was healthy at year end, chief executive Wikus Lategan said yesterday.
Revenue for the homes and memorial parks developer increased 50.3 percent to R1.322 billion.
Headline earnings of 105.63 cents per share were well up from the headline loss of 15.17c per share in 2021. Net debt to equity fell to 0.71from 0.99. Net asset value increased 16.4 percent to R7.93 per share. There was some R591 million of liquidity available at the year end.
Lategan said in a telephone interview that it was the third-highest revenue number in their history, with both revenue and gross profit delivering a stronger performance.
The gross profit margin recovered to 21.3 percent from 12.3 percent, and from a level of 19.7 percent at August 2021, due to rigorous cost containment, outsourcing of construction activities and enhancements in the development process.
The pipeline for the Residential Property Development and Memorial Parks now stood at R17.4bn.
Lategan said the results showed the group was able to withstand challenges by sticking to its “#sustainableactions” credo.
“More than that, we certainly have a team in place that can get the job done,” he said.
The revenue pipeline for residential property development was R15.3bn, excluding the potential contribution of the Frankenwald property.
The group mainly develops homes in the below R500 000 per two-bedroomed unit level of the market. Lategan said demand was such that “basically we can’t keep up with demand,” and there had remained optionality on pricing, despite the higher interest rate environment.
Lategan said major achievements in the residential property business in the year included that gross margin was now well within target range.
In addition, there had been careful capital allocation to high yielding projects.
The product and lifestyle offering were further enhanced while taking affordability into account – the group had worked hard over recent years to diversify its projects, products and regions where it operates, said Lategan.
“The revenue diversification between projects and provinces and our sustainable mix of customers are ensuring
consistent handovers and cash flows,” he said.
There were 4 583 opportunities under construction compared to 4 654 a year ago, 2 685 opportunities completed and a pipeline of 24 563 opportunities.
Lategan said they were well positioned, sufficiently capitalised and had sufficient liquidity to address market demand.
The group planned to self-fund about R120m of infrastructure investment in the new financial year, part
of a plan to be in control of as much of the development process as possible – previously it relied on public sector financing for infrastructure.
Lategan said given predicted interest rate increases, they remained watchful of the economic impact on its customers and the potential tightening of lending criteria from banks.
“We remain confident though that we have made major strides in containing costs and will continue working on making building design and layouts more efficient, to contain building costs that impact margins,” he said.
He said debt levels were expected to decrease in line with the targets as set by management, however, additional funding might need to be raised should short-term funding be required at any given stage due to the seasonal nature of the group’s cash flow.
Some R107.4m of debt was settled in the year.
The Residential Property Development business remained the largest contributor to revenue,.